Not So Sweet

Hard cider has always faced an uphill battleforattention, one that has required entrepreneurs in the space to convince both consumers and retailers that fermented apples should be on the menu.

For years, companies like Vermont Hard Cider have fought for fridge space, tap handles, distributor focus and retailer consideration. In their quest to mainstream hard cider in the United States, companies have gotten used to protecting their retail presence, fending off attacks from [wine] coolers, craft and everything in between.

But in recent years, cider companies have finally enjoyed healthy growth. Between 2007 and 2012, sales tripled to more than $600 million, according to market research firm IBISWorld. And in 2014, category-wide volume sales were up 74 percent, according to market research firm IRI. It seemed like the craft boom had empowered the apple.

But now a new competitor, hard soda, has entered the fray, and it’s got some cider makers worried about their ability to maintain their position on the shelf.

Driven by the impressive overnight success of Pabst product Not Your Father’s Root Beer (NYFRB) – a boozy, soda-inspired concoction that expanded nationally this summer – hard soda has emerged as a legitimate product potentially deserving of at least some of cider’s space, analysts suggest.

“I think that the hard sodas and hard root beers have been weighing on the category,” Vivien Azer, an alcoholic beverage-focused analyst with Cowen and Company, told BevNET Magazine. “Consumers are not necessarily rejecting cider, “per se”, but they are experimenting.”

“It is an exploratory category,” he said. “Everything you read about cider is that it is slowing nationally. Sure, we’ve seen a slowdown over the last five months and cider is not growing like it was before, but where you have a strong local cider brand, the trends are much better.”

Adding to concerns for cider makers: the successful rollout of NYFRB also cleared the way for a flood of new category entrants.

After seeing the brand climb up the IRI charts, Boston Beer Company accelerated the national launch of its own hard soda offering, Coney Island Hard Root Beer, rolling it out months ahead of schedule. New York’s F.X. Matt Brewing, meanwhile, quickly jumped on the trend, launching the “Jed’s Hard” lineup with three flavor varieties – root beer, orange cream and black cherry cream.

The industry’s biggest players are paying attention too. Anheuser-Busch InBev and MillerCoors are both planning to launch brands of their own in 2016. A-B will introduce Best Damn Root Beer and MillerCoors will launch Henry’s Hard Soda, a line extension from its Henry Weinhard brand. Boston Beer and Pabst, for their parts, also plan to roll out additional flavors.

All of that activity is putting pressure on cider makers, particularly craft producers, to reassure retailers that the category will continue to grow, despite overwhelming evidence that consumers are gravitating toward sugary alcopop-like offerings.

“I am concerned that when some of the commercial ciders start to decline, that cider, as a category, will look like it’s weakening when it’s really just the large commercial players,” said Dan Rowell, the CEO of Vermont Hard Cider. “It is going to be hard for us to educate retailers and convince them that craft ciders are still doing well.”

And while many believe that hard root beer’s current gains have come at the expense of large domestic cider brands, like A-B’s Johnny Appleseed, which is down more than 23 percent, according to market research firm IRI, options like Vermont’s Woodchuck line – which has been trying to identify itself as more of a craft-style offering – are feeling the heat too. Sales of Woodchuck are down about 15 percent, according to Rowell. Meanwhile, volume sales for Vermont’s parent company, C&C group, which owns the Wyder’s and Magners brands, among others, are down more than 18 percent, according to IRI.

Rowell believes that his own company’s declines are coming from within the category, at least in part. He claims that sizeable advertising investments – $100 million, he said – from companies like Boston Beer, Heineken, Anheuser-Busch and MillerCoors, have heavily marketed their own cider products across mainstream media channels and helped boost broader consumer awareness to the expense of Vermont Hard Cider and its stablemates.

But that doesn’t explain a downturn for the broader category, which had been growing steadily until recently. Over the last four weeks, category-wide cider volumes declined 7.7 percent, according to Nielsen, a market research firm. And over the last 12 weeks, cider volumes were down more than 3 percent.

That has cider makers looking at hard sodas as a contributing factor: Not Your Father’s Root Beer has been in the midst of a highly successful launch.

Pabst announced the national rollout of NYFRB in June. By the end of July, the brand was already the no. 11 best-selling “craft” product in market research firm IRI Worldwide’s multi-outlet and convenience store universe. Fast-forward three months, and NYFRB has surpassed stalwart craft brands like Boston Lager, New Belgium Fat Tire and even Lagunitas IPA, in dollar sales – generating $75 million through November 1.

But is there a correlation between cider’s downward trend and hard soda’s rise, or is it just a coincidence?

If hard soda is to blame, Amy Gutierrez, the category manager for BevMO!, a top specialty beverage retailer with 157 stores on the west coast, isn’t buying it.

“My ciders are still booming,” she said. “Most of my stores still have eight feet of space, just for cider.”

That space could shrink, however, if the trends continue, she said.

“Where would we put it,” she asked. “Am I going to take away four feet of cider and give it to root beer? If the sales for hard root beer keep up, I am going to have to.”

Both Liebhardt and Rowell have considered that future, and both are optimistic that local craft options will ultimately win out.

“True authentic ciders will continue to prosper and we will get our fair share eventually,” Rowell insists.

And that rationale might have legs: after all, craft beer, a category more closely correlated with craft cider, has continued to grow, even as premium domestic beer brands have been in decline for years. Meanwhile, NYFRB and the like are sweeter, closer in taste and composition to “malternatives” like Mike’s Hard Lemonade and other alcopops. That means that smaller, higher quality cider producers might be in the sweet spot.

“Retailers are starting to invest behind local brands and their giving us a seat at the table,” said Liebhardt. “I still think cider is an underdeveloped segment. It is under-merchandised and we need to bring more awareness to the category. I think having a good liquid, a good story and being strong on-premise will be key.”